Audience Heterogeneity, Costly Signaling, and Threat Prioritization: Bureaucratic Reputation-Building in the EU

Abstract

Organizational reputation theory suggests reputational threats can induce public organizations to change their behavior. However, it offers few insights into how organizations in contexts of high audience heterogeneity prioritize between conflicting threats, or how they ensure reputation-seeking signals reach their intended audiences. This article seeks to close these knowledge gaps. It expects organizational threat prioritization to be shaped by the centrality of the threat to the organization's distinct reputation, and by differences in audiences' capacity to put pressure on the organization through mobilization. Moreover, it argues that public organizations strategically vary the observability and costliness of outgoing reputation-seeking signals in response to shifts in the balance of reputational threats they face. It finds support for these expectations in the context of the European Commission, a supranational organization operating in a context of high audience heterogeneity and severe reputational threats. The empirical analysis is based on the Bayesian longitudinal modeling and simulation of Commission decision-making and applies a novel dataset on fiscal rule enforcement in the European Union (EU). The findings have important implications for organizational reputation theory and call for a renewed focus on the mechanisms underlying audience-induced organizational behavior.